White Mountains’ third-quarter 2023 results show its Ark reinsurance subsidiary is starting to see increasingly significant benefits from the $250 million Outrigger Re collateralized reinsurance sidecar it launched in late 2022.
White Mountains has demonstrated its appetite for capital deployment in insurance-linked securities (ILS) and reinsurance-related investments as it becomes the lead investor behind its Ark Insurance Holdings subsidiary’s $250 million collateralized reinsurance sidecar, Outrigger Re Ltd.
We already have reported earlier this year that Outrigger Re’s sidecar investment was producing profits, helping sponsor reinsurer Ark to underwrite more risks in the currently attractive reinsurance market environment.
After the third quarter, these benefits become increasingly important, with the bonuses awarded to the Outrigger Re sidecar and the revenue it generated both increasing.
In the third quarter of the year, Manning Rountree, CEO of White Mountains, said: “Ark produced a combined ratio of 81% while increasing premiums by 17% year over year. WM Outrigger Re generated a combined ratio of 44% and $37 million income before tax.
While the combined ratio for the White Mountains share of the Outrigger Re sidecar was 44% for the third quarter, for the first nine months it was just under 40%.
Outrigger Re’s written premiums reached $108 million after the third quarter, but what is more impressive is the significant increase in earned premiums as the underwriting portfolio began to return profits for White Mountains.
Premiums acquired on its participation in Outrigger Re reached $61 million in the third quarter of 2023 alone, bringing the figure for the first nine months of the year to $75 million.
This increase in premiums in the third quarter meant that pre-tax profit for the period was reported as $37 millionwhile the pre-tax income generated by White Mountains’ stake in Outrigger Re had reached $53 million for the year until the end of September.
Outrigger Re is a share sidecar of Ark, so its CEO’s comments are also helpful in explaining the sidecar’s performance.
Ian Beaton, CEO of Ark, said: “Ark had a good third quarter despite the global catastrophes. The combined ratio stood at 81% for the quarter, an improvement of six points year-on-year. The gross premiums written were $251 million in the quarter and $1,667 million year-to-date, up 17% and 33% respectively from 2022 levels. The change in risk-adjusted rates is up 11% during the quarter and 16% since the start of the year. ‘year. The dynamic remains positive.
Although Ark benefits from the additional efficient reinsurance underwriting firepower provided by the Outrigger Re sidecar, it is also clear that White Mountains benefits too, with attractive revenue levels now being realized.
It is also worth noting that at Outrigger Re, the change in risk-adjusted rates for its global property reinsurance portfolio was 17% in the third quarter of 2023 and 36% for the first nine months, which will have helped generate high profits for Montagnes Blanches.